2003-01-23 04:00:00 PDT Washington -- The government's asylum and refugee resettlement programs, which draw about 120,000 applicants a year, will be halted Friday because of a last- minute change in the homeland security law that will leave them without funding.

Some officials at the Immigration and Naturalization Service and immigration advocates said they were unaware of the problem until last week.

According to an aide to Sen. Edward Kennedy, D-Mass., it could have a much wider impact at the start, resulting in the temporary suspension of applications for other immigration benefits, from naturalization to work permits, permanent resident status, green cards and more. "Probably tens of thousands of applications would be held up," said Esther Olavarria, Kennedy's chief immigration counsel.

INS officials said they think they can overcome that difficulty quickly, but they were less certain about the prospects for the refugee and asylum programs.

Under current law, applicants for other immigration benefits pay a fee that covers the cost of processing their applications. They also pay a surcharge that funds the handling of the applications of refugees overseas and of asylum seekers who are already in the United States, all of whom claim to be the victims of persecution in their countries.

"We're talking about tens of millions of dollars," an INS official, who requested anonymity, said this week of the surcharge. He said he could not be more precise at that moment.

Immigration advocates have long lobbied for elimination of the surcharge and for the government to pick up the tab. They thought they had succeeded last year when both House and Senate versions of the homeland security bill contained provisions directing the INS to end the surcharge, which averaged about $50 an applicant, and authorizing the appropriation of "such sums as may be necessary" to pick up the slack.

But in the final hours of cutting and pasting that preceded the bill's passage in November, the language authorizing the appropriation was scuttled while the section ending the surcharge was retained.

Congressional aides, both Democratic and Republican, as well as INS officials said resistance from "appropriators" led to the deletion. It was less clear if the retention of the language eliminating the surcharge -- and thus all funding for the two programs -- was also deliberate.

"This action was passed by the Congress as part of the Homeland Security Act of 2002," INS spokesman Bill Strassberger said. "We recognize that this presents problems, but we will be working closely with Congress to resolve this issue as quickly as possible."

Aides to Kennedy and to Rep. James Sensenbrenner, R-Wis., chairman of the House Judiciary Committee, said the lawmakers are committed to ensuring that refugee and asylum programs are adequately funded. Olavarria has been working to add an amendment to the omnibus appropriations bill now on the Senate floor,

perhaps by striking the provision eliminating the surcharge or by delaying its effective date.

Friday, however, is the day the new law goes into effect, and Justice Department lawyers have told the INS that it must adopt a new fee schedule, effective immediately.

INS officials confirmed Tuesday that they will be required to reduce application fees by an average of $50, or by 25 percent. For example, they said, a green card application fee of $255 will be lowered to about $186, and a work permit application fee will be reduced from $120 to $88.

Olavarria said she'd been told that any applications with checks for the higher amounts would have to be rejected. "INS gets thousands of applications like this on a given day," she said, "so processing of them will grind to a halt."

But INS officials said they plan to set up a system of providing refunds rather then rejecting the applications. "We are aware of that problem, and there are no plans to reject the application if they overpay the fee," one said. "We are not planning to stop the processing of asylum or refugee applications, either. We will just have to find funds from some other source."